The Donald Doesn’t Know What the Donald Doesn’t Know

By David Stockman  |  April 5, 2019

Those who make peaceful revolution impossible will make violent revolution inevitable.

– John F. Kennedy, Remarks on the first anniversary of the Alliance for Progress, March 13, 1962

Free-market capitalism is getting strangled by monetary central planning.

Federal Reserve policies have turned Wall Street into a casino. They’ve made Corporate America into a financial engineering cartel. And they’ve distorted the price-wage-cost structure of the U.S. economy.

We present evidence of the corrosive impact of “easy money” – from Wall Street to Main Street – and we identify catalysts that might pop the Everything Bubble and mark the hard slide down from Peak Trump in this month’s issue of The Stockman Letter.

Indeed, the Donald – that self-described “low interest man” – is doubling down on the very same stuff that’s killing Main Street prosperity. He said as much to the original Bubblevision star Maria Bartiromo:

Frankly if we didn’t have somebody that would raise interest rates and do quantitative tightening, we would have been at over 4% instead of a 3.1%… I mean, they did $50 billion a month. I said, “What are we doing here?”

Has the Donald forgotten how he roused left-behind voters of Flyover America way back in 2016? That’s one of the questions I address in my new book, Peak Trump: The Undrainable Swamp and the Fantasy of MAGA.

Well, the Fed is the key to keeping all the creatures who make Imperial Washington what it is fat and happy. Without its accommodations, the entire Acela Corridor, including Wall Street, would simply shrink into well-deserved ignominy.

Indeed, the only way to restore Main Street prosperity – to Make America Great Again – is to clean house at the Fed. It’s not just about the current names on the Board of Governors, nor even the incompetents the Donald has nominated to fill open seats.

It means shutting down the Federal Open Market Committee (FOMC). It means abandoning interest-rate targeting and yield-curve management. It means returning to the discipline of two-way financial markets. It means getting out of the fraudulent business of debt monetization.

It’s popular these days to talk about how “it can happen here.” That phrase is a turn on the title of Sinclair Lewis’s 1935 novel about the rise of a charismatic fascist demagogue to the presidency of the United States.

The resurgence of It Can’t Happen Here is about the Donald, his authoritarian tendencies, and his struggles with facts.

And when you read about Acting Secretary of Defense Patrick Shanahan’s presentation of the proposed fiscal 2020 Pentagon budget to the Senate Armed Services Committee, you should be alarmed by the absolute unchecked growth of what Eisenhower called the “military-industrial complex.”

His original wording was “military-industrial-congressional complex.” But even that sells it short now… It’s more like “military-industrial-congressional-surveillance-security complex.” And it’s going to cost $718 billion, probably closer to $1 trillion when you consider all the non-Defense Department “defense” spending.

In classic fashion, Shanahan is a former employee of Boeing (NYSE: BA), lately bogged down by multiple crashes involving its 737 Max passenger jets but forever a key part of the Warfare State.

According to Acting Secretary Shanahan, the top U.S. national security threat is “China, China, China.” That’s a direct quote from his testimony.

Now, we’ve discussed the Red Ponzi at length, including a five-part series on the potential for a new world war with a Sino-American headline match. Though we don’t discuss it directly in the April issue of The Stockman Letter, it is one of the potential catalysts that could burst the Everything Bubble. Our trillion-dollar “defense” budget, of course, thrives on such omnipresent, existential threats.

But what if the real threat’s from within? That’s what Ray Dalio is warning. Dalio’s the founder of one of the world’s biggest hedge funds, Bridgewater Associates.

He thinks the wealth and income gap is a national emergency. He advises more coordination of fiscal and monetary policy. He suggests a bipartisan commission to re-engineer the economic system. He wants new laws to create more accountability in government and to institute minimum standards for health care and education.

That’s sounds an awful lot like AOC-and-MMT-style socialism. What, “make the revolution,” Ray?

I’ve got a better idea to stop populism and wealth maldistribution: abolish the FOMC and prohibit monetization of the public debt.

Keep It Simple…

Desperate times call for… “common sense” measures.

And these are desperate times… Markets are corrupted by monetary central planning. They’re confused. And the road back is going to be treacherous.

We’re looking at a major re-pricing for all financial assets. And thousand-point intraday or day-to-day swings are part of that equation. Those can be frightening… for “buy and hold” investors.

I have a different approach, one that combines strategy and tactics into a plan flexible enough for you to survive and thrive amid the coming chaos. It’s called “The Stockman Model.”

All we’re after is a little stability, perhaps a chance to pocket a windfall when opportunity presents…

To common sense,

David Stockman's signature

David Stockman

Former White House Budget Director: 50% Crash Coming!

The horrible start to October has investors on high alert. This market bubble – inflated by the Fed’s low interest rates and Republican tax cuts – may have finally run its course.… Read More
David Stockman

David Stockman is the ultimate Washington insider turned iconoclast. He began his career in Washington as a young man and quickly rose through the ranks of the Republican Party to become the Director of the Office of Management and Budget under President Ronald Reagan. After leaving the White House, Stockman had a 20-year career on Wall Street.MORE FROM AUTHOR